Two Baltimore businessmen were indicted Tuesday, accused of conspiring to rig bids at Maryland tax lien auctions in the latest set of charges to develop from a sweeping multiyear federal investigation.
A third defendant pleaded guilty in the case last year.
According to the one-count indictment, filed in Baltimore's U.S. District Court, Harvey M. Nusbaum and his business partner, Jack W. Stollof, both in their 70s, colluded with others from April 2002 through early August 2007 to ensure that their small group of investors won the vast majority of properties by agreeing not to compete at certain tax lien auctions.
Bidders at such auctions win the right to collect debts owed by delinquent bill payers, plus fees and interest, or to foreclose on the homes.
A 2006 Baltimore Sun investigation showed that Nusbaum and Stollof were aggressive investors in Maryland ground rents, routinely seizing homes or extracting large fees from residents who were less than $25 behind in their payments. Such tactics led the General Assembly to overhaul the ground rent system, under which more than 100,000 Maryland homeowners pay rent on the land beneath their homes.
"With so many homeowners struggling these days, it is more important than ever that all aspects of real estate transactions, including tax lien auctions, remain competitive and free from collusion," Scott D. Hammond, a deputy assistant attorney general in the Justice Department's antitrust division, said in a statement. He vowed to "vigorously prosecute those who rig bids and deny Americans a competitive bidding process."
No arraignment date has been set. If convicted, Nusbaum and Stollof could be sentenced to 10 years in prison and a fine of more than $1 million.
Attorneys for both men said their clients intend to plead not guilty - "emphatically not guilty," said Nusbaum's attorney, Paul Mark Sandler.
"[We] look forward to establishing the truth as the process unfolds," said Stollof's attorney, Kirby Behre.
A third ground rent investor identified in the Sun series, Steven L. Berman, pleaded guilty in the tax lien case. His plea agreement requires him to cooperate with investigators, which means that he might have to testify against his former associates, his attorney, Geoffrey Garinther, acknowledged.
"Part of his cooperation with the government [requires] that he testifies when they ask him," Garinther said.
